RHI - Heidrick & Struggles: Growing Strong And Profitable Yet EV/EBITDA Is 3.0

2024-01-29 05:01:19 ET

Summary

• Heidrick & Struggles has a history of steady growth, a good profit margin and a strong balance sheet.
• Yet it trades for a 40-50% discount to its peers.
• That discount gets even larger when you exclude its money losing two smaller segments and all the cash on its balance sheet.
• The EV/EBITDA ratio is currently 3.0x. I have never seen that ratio so low for a profitable company with a good balance sheet and good prospects.

Heidrick & Struggles ( HSII ) is one of the most undervalued solidly performing companies I have ever seen. I do a lot of deep value investing so I routinely see beaten down money losing companies I believe are 30-50% undervalued. But Heidrick is not a struggling company. Not even close. It’s a financially strong, solidly profitable and growing company. I believe the disconnect is in part due to a recent downturn in its industry that is likely to be short lived.

Background

Heidrick & Struggles is an executive recruiting company based in Chicago. In recent years it has expanded into 2 adjacent segments, On Demand and consulting. On Demand is to place temporary or interim executives. In the first 9 months of 2023, executive recruiting revenues were 66% in the Americas, 23% in Europe and 11% in Asia and the Pacific....

For further details see: